July 3, 2015

From economics to politics to idiotism

Comment on ‘Breaking: ECB states that Euro is reversible and not irrevocable’

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Remember how it all started? The majority of Europeans wanted one Europe, do away with this ridiculous borders, and they wanted — and still want — it democratic and prosperous. At the latter point economics comes in. What is the economist's task? Roughly this.

“A scientific observer or reasoner, merely as such, is not an adviser for practice. His part is only to show that certain consequences follow from certain causes, and that to obtain certain ends, certain means are the most effectual. Whether the ends themselves are such as ought to be pursued, and if so, in what cases and to how great a length, it is no part of his business as a cultivator of science to decide, and science alone will never qualify him for the decision.” (J. S. Mill)

The economist's task is to figure out how a prosperous Europe can be realized (as a step between The Wealth of Nations and The Wealth of the World). The decision about the political future of Europe has been taken by the legitimate political bodies. For the economist qua economist this is a fixpoint. What is required is his professional competence for a successful realization.

Here the problem starts. Economists have no clear idea about how the actual economy works. What they have produced so far under the label of Walrasianism, Keynesianism, Austrianism, etcetera, is scientifically worthless. The representative economist cannot tell the difference between profit and income. This is like physics before they had figured out such elementary things like the difference between velocity and acceleration.

The great scandal of economics is that without deeper knowledge but much opinion economists turn to politics. The scandal consists in speaking with scientific authority of which not much exists. One of the many low points had been reached, for example, when Hayek volunteered as academic fig leaf for Thatcher's rather straightforward power politics. To be sure, Hayekian economics never satisfied the scientific criteria of material and formal consistency and never will. His economics was not good enough for science but good enough for politics. This example can easily be multiplied.

The Greek crisis has to be seen in the context of the initial plan. The economist's task at this juncture is to find a solution that helps to realize the initial political decision. Of course, every economist qua citizen is free to abolish the eurocrats, but then he has to put his political hat on and his scientific hat off.

Where has heterodox economics landed in the grand scheme of things? After leaving economics proper and taking part in the idiotic good guy/bad guy discussion they landed in a quarrel about whether Bulgarians are ugly.

That's economics at its best.

Egmont Kakarot-Handtke